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LLM Inference Fundamentals for the Routing Engineer1 / 3

1 min lesson

Self-hosted vs provider-hosted

Use "Host your own models, or call a provider's API" to describe the practical rule.

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Self-hosted vs provider-hostedthe tradeoff that frames the whole role

This is the strategic fork the inference platform lives on: host your own models, or call a provider's API. A mature platform does both and routes between them.

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Advanced table

Reference table

Dimension
Cost at scale
Self-hosted
Lowest if utilization is high
Provider-hosted
Per-token margin baked in
Dimension
Control / tuning
Self-hosted
Full (batching, KV paging, quantization)
Provider-hosted
Limited to API knobs
Dimension
Operational burden
Self-hosted
You run serving + on-call + capacity
Provider-hosted
Provider runs it
Dimension
Flexibility / new models
Self-hosted
You must deploy each one
Provider-hosted
New models appear behind one API
Dimension
Failure exposure
Self-hosted
Your fleet, your blast radiusHow much breaks if a change goes wrong; the scope of potential damage. Press Enter for the full definition.
Provider-hosted
Their outage degrades you unless you fail over

The honest interview answer starts with "it depends on volume, latency budget and which models." Then reason it through.